Egypt Economic Outlook

Egypt’s economic growth accelerated from an annual 3.0% in Q3 to 4.0% in Q4 of calendar year 2015. While the GDP reading and the Central Bank’s recent decision to devaluate the pound are positive developments, Egypt’s overall economic situation remains far from rosy. The acute shortage of U.S. dollars in the economy—caused by a decline in tourism and foreign investment after the Arab Spring protests in 2011—continues to restrain imports and economic activity. Depleted foreign currency reserves and rapidly-growing external financing needs make Egypt dependent on outside financial support, which is normally granted by Saudi Arabia and the UAE. Moreover, the political situation took a turn for the worse recently. President Fattah el-Sisi’s announcement in mid-April to hand over two Red Sea islands to Saudi Arabia aggravated dissent against the government and provoked protests, with critics arguing that el-Sisi ceded the islands in return for financial support.